Fund Chiefs: ‘We’ll Have to be Real Asset Managers’

Looking for better performance: investors are wondering if there’s a ‘spare tire for the journey’ in a post-QE world, asset manager Pimco said at the FondForum in Monaco, a month after this practice session of the F1 Grand Prix.

Reuters

Fund managers will have to work harder to achieve strong returns for their clients as the U.S. Federal Reserve begins to scale back its quantitative easing measures, senior participants of the asset management industry have warned.

Executives at the helm of some of the world’s largest asset managers said the market’s violent reaction to chairman of the U.S. Federal Reserve Ben Bernanke’s comments last week that the U.S. would begin to taper its bond-buying program had underscored the market’s reliance on cheap money. The were speaking at a panel discussion on central banks at FundForum International 2013 in Monaco.

Pascal Duval, chief executive for Europe, the Middle East and Africa at Russell Investments, said: “Life is going to be much less simple than it used to be.

“We have to be experts at capturing the multiple carry trades wherever they are. We’ll have to be experts at dynamic management in terms of asset allocation. We have to be experts at timing in and out of equity markets and not being in denial when there is clearly over valuation in the fixed income market. We’ll have to be very good at alpha management. We’ll have to be real asset managers.”

Jim McCaughan, chief executive of Principal Global Investors, highlighted bond portfolios as an area where managers would have to change their approach.

Citing Pimco chief investment officer Bill Gross’s comments in May that the 30-year bull market is over, he said: “I think many bond managers have been totally in denial for the last three to four months.”

Amin Rajan, chief executive of Create research, a network of financial services and international researchers, said that while quantitative easing measures by central banks had helped developed nations avoid the worst of the crisis, the market’s reaction to Mr. Bernanke’s comments underscored the potential risks of such policies.

Mr. Rajan said: “On the negative side, there have been huge worries that what has been a force of stability can very easily be turned into a force of instability. We found that last week when Mr. Bernanke made a very sensible comment about the fact that at some stage they will have to adopt a taper approach and take the punch bowl away.”

Joe McDevitt, managing director in Pimco’s London office, said U.S. quantitative easing measures had helped to buy time, but “the question going forward is what further policy tools will remain available in the event that additional measures need to be taken? We believe this to be one of the key reasons why markets are so jittery at the moment. Essentially, investors are unsure if there is a spare tire for the journey.”